Frequently asked questions on the technical consultation on the infrastructure levy

The government recognises that local authorities will encounter expenses in transitioning to a new Levy system and using the Levy to fund these costs will be important.

Question 37 of the technical consultation seeks views on the administrative portion of the new Levy.

The government is also bringing forward legislation through the Levelling Up and Regeneration Bill to make clear that the existing system of developer contributions can be used to support the administrative and set up costs of the new Levy.

Local planning authorities will develop an Infrastructure Delivery Strategy (IDS).

Chapter 4 of the technical consultation sets out the proposed content of the IDS. This includes a spending plan which could include information about how much funding raised through the Levy will go towards administration. Question 27 of the consultation seeks views on the content of the spending plan. 

As with CIL at present, the Infrastructure Levy charging authority for an area will generally be the local planning authority for that area, as defined by the Planning and Compulsory Purchase Act 2004.

Local planning authorities will need to evidence whether the rates they set will be able to keep affordable housing at levels that equal or exceed the level of affordable housing provided through developer contributions during a previous time-period. Historic delivery should not be used as a cap on future delivery. This time period will be specified in regulations. Levy rates will be set out in charging schedules, which will be examined.

Chapter 5 of the technical consultation provides information on calculating ‘at least as much’ affordable housing. 

On-site affordable housing will be delivered predominantly as an in-kind payment of the Levy through a new ‘right to require’. This will see a percentage of the Levy value delivered in-kind by developers as on-site affordable housing.

The ‘right to require’ and Levy receipts can be used to secure affordable tenures such as Social Rent homes, Affordable Rent homes, Shared Ownership homes, and First Homes. The amount of affordable housing that a local planning authority can secure through the ‘right to require’ will depend on the tenure type. Where a tenure has a steeper discount from the market rate, the local authority should expect to secure fewer units through the right to require. The Levy has been designed to be adaptable to any potential policy changes around affordable housing tenure types in the future.

Local planning authorities will develop an Infrastructure Delivery Strategy (IDS). Chapter 4 of the technical consultation sets out the proposed content of the IDS. This includes a spending plan which could include information about the authority’s approach to affordable housing, including tenure mix. Question 27 of the consultation seeks views on the content of the spending plan. 

On-site affordable housing will be delivered predominantly as an in-kind payment of the Levy through a new ‘right to require’. This will see a percentage of the Levy value delivered in-kind by developers as on-site affordable housing.

The ‘right to require’ will not be the only means for delivering affordable homes under the Levy. Local planning authorities will be able to secure affordable housing in addition to that provided in-kind through the ‘right to require’ by using funds to deliver affordable housing themselves, or providing grant funding to registered providers of affordable housing.

Question 30 in the technical consultation seeks views on the ‘right to require’.

Currently, a local plan will typically set out the proportion of units on-site which should be affordable and the tenure type that should be provided. These policies are often negotiated downward on viability grounds, resulting in less than policy compliant levels of affordable housing. In the new system, on-site affordable housing will be delivered predominantly as an in-kind payment of the Levy through a new ‘right to require’. This will see a percentage of the Levy value delivered in-kind by developers as on-site affordable housing, protecting it from the pressure of other spending priorities. 

The Levelling Up and Regeneration Bill sets an expectation that new local plans will contain policies in relation to affordable housing. It is expected that local planning authorities will set policies on the amount and type of affordable housing needed and how it should be delivered, including through the right to require (in areas when the Levy has been implemented, taking into account that it will be rolled-out gradually through ‘test and learn’). The Bill provides a framework for the introduction of reforms to plan-making, but much of the detail will be dealt with through new regulations, a new NPPF focused on principles for plan-making and supporting guidance. DLUHC intends to consult on key principles for the new system of local plans later in 2023

Under the Infrastructure Levy system, local planning authorities will develop an Infrastructure Delivery Strategy (IDS). Chapter 4 of the technical consultation sets out the proposed content of the IDS. This includes a spending plan which could include the proportion of the Levy that a local authority intends to secure on affordable housing through the ‘right to require’ as a standard approach, including the tenure mix of these homes, as well as whether that authority intends to take a ‘grant pot’ approach to securing affordable homes.

This should be informed by the evidence for affordable housing need set out in the local plan and its evidence base. This will be subject to further policy development to minimise risk of duplication.

Under the Infrastructure Levy, local planning authorities will be able to borrow against future Levy receipts in order to support the delivery of infrastructure alongside development. Legislation requires that they only borrow when they can afford to do so.

In borrowing against Levy proceeds, local authorities will be able to make use of the Public Works Loan Board (PWLB) facility. The normal rules for borrowing from the PWLB will apply, whereby the facility can support local authority capital spending provided that capital spending has a policy objective (in other words, is not for the purpose of generating a monetary return), and that it is within the Prudential Framework. There can be risk where authorities are reliant on forecast revenues streams to afford debt if those revenue streams do not materialise or are less than forecast.

Question 21 of the technical consultation seeks views on borrowing against Infrastructure Levy proceeds.

The consultation also seeks views on how an early payment mechanism might operate at questions 21-23, to provide local authorities with earlier access to capital.

When the infrastructure is to be provided by a third party, such as the county council in a two-tier area, borrowed funds may be transferred from the local planning authority to the infrastructure provider, subject to agreement on the use of such funding.

Question 21 of the technical consultation seeks views on borrowing against Infrastructure Levy proceeds.

Local planning authorities must service the interest cost and make minimum revenue provision (a charge to revenue) with respect to debt. As the Levy will ultimately serve as an ongoing revenue stream which local planning authorities will be able to draw from, it is appropriate for borrowing to occur against that stream, given the PWLB lends to support a local authority’s s whole capital plan, rather than providing project by project financing.

When setting Levy rates, charging authorities must take into account certain factors. This includes matters relating to the viability of development in the area.

Question 11 of the technical consultation seeks views on instances where some brownfield sites should qualify for offsets from final Levy liabilities, where the nature of a fixed-rate Levy could unduly affect scheme viability.

The Infrastructure Levy aims to capture land value uplift at a higher level that the current system. The government intends that all areas will benefit from the new Infrastructure Levy.

The Levy will be applied as a percentage figure charged on the Gross Development Value (GDV) of a scheme above the minimum threshold. Levy rates will be charged to the internal area (m²) of a development as a percentage of the final GDV (£ per m²) above this minimum threshold. 

Under the existing Community Infrastructure Levy (CIL), the term gross internal area (GIA) is not defined in the regulations. It is a matter for charging authorities to determine what aspects of a development should be included in the calculation in accordance with its ordinary meaning. 

The government envisages that the Infrastructure Levy will be consistent with this approach. The Government is engaging with the Valuation Office Agency on designing appeals processes.

Annex B of the technical consultation provides an example which aims to demonstrate how the Levy might be charged against different kinds of floorspace in a development, each of which are associated with different degrees of land value uplift. It will show how the Levy could be charged for development comprising one type of use, or to a mix of different uses.

The Levy will be charged by local authorities, based on the GDV of a development upon its completion. What is meant by ‘completion’ in this context will be a matter for regulations. The Government recognises that there may be circumstances in which it is necessary for a development to be ‘deemed complete’, in order to prevent avoidance of the Levy. The Government intends to consult on regulations.

Table 3 in Chapter 3 of the technical consultation sets out the proposed process for calculating and paying the Levy, including schemes which have multiple phases.

When setting their Levy rates, local planning authorities will need to assess build costs.

Build costs may change over time. That is why it is intended for the minimum threshold to be indexed to a measure of inflation, to account for variations in build costs. 

This is outside the scope of the Levy, which will be based on Gross Development Value (GDV) at the point of site sale or completion.

Where a development isn’t sold, a valuation will be undertaken to determine what the final GDV of the site will be, had it been sold on the open market.

Supported by RICS, the government will consider further making sure that valuation is effective in the new system. This will include exploring where further work may be needed on valuation standards for the Levy (for instance, on build to rent homes).

Once planning permission is granted, a developer or other party must assume liability to commence development. At this point, the Levy liability will be registered against the development site as a local land charge. The local land charge and any occupation restriction linked to the Levy will be removed from the development once payment to meet the provisional Levy liability has been made.

Questions 16, 17, and 43 in the technical consultation seek views on enforcement.

Some stakeholders have suggested that the removal of the local land charge should not occur when the provisional Levy liability is paid, but instead remain attached until the final adjustment payment is made, and a scheme is complete. While this approach would help make sure liable persons pay the full Levy amount owed, it would also inhibit the sale of new homes before completion, reduce the incentive for the provisional liability to be paid prior to completion, and potentially risk that liability for the land charge is passed on to residents.

To protect against any failed payments due at the final adjustment payment stage, the government envisions that a penalty fine could be charged.  

Questions 16, 17 and 43 in the technical consultation seek views on enforcement.

The Government intends that information in the Infrastructure Delivery Strategy (IDS) will build upon and replace Infrastructure Delivery Plans that are produced as part of the evidence base to support the production of a local plan. The IDS should also draw upon key documents like the Local Transport Plan or Local Cycling and Walking Infrastructure Plan, education infrastructure plans and pupil planning documents, the estate planning strategies of Integrated Care Boards or other relevant strategies.

Chapter 4 of the technical consultation provides information about the IDS.

In the current system, local authorities are required to set out how s106 and CIL receipts have been spent as part of an Infrastructure Funding Statement (IFS). Section 204N(9) of the Bill allows regulations to require a charging authority to account for Levy receipts received or due. The government will consider the role for reporting how the Levy is spent as part of the development of regulations.

Where elements of an IFS have been used to support plan making (i.e. in place of an IDP) this element will be replaced by the Infrastructure Delivery Strategy.

It is anticipated that the Infrastructure Delivery Strategy will be an iterative document that can reflect changing circumstances as developments come forward. The Government will set out a process that allows for updates without further examination, and the engagement that should be undertaken alongside this. The Government will also set out details of the circumstances under which a full re-examination is required.

Chapter 4 of the technical consultation sets out the proposed drafting requirements for the Infrastructure Delivery Strategy.  

The government envisions that the drafting of an IDS will be a consultative and iterative process between, for example, local authorities, infrastructure providers, including transport providers and operators, highways and transport authorities (including sub-regional transport bodies), utilities such as water companies, neighbouring authorities, Integrated Care Systems, and local education authorities (county councils in two-tier areas).

Levy receipts can be passed to third parties such as county councils, highways authorities, and water and sewerage undertakers, if they are best placed to deliver the infrastructure. 

Question 28 of the technical consultation seeks views on how the government can make sure that infrastructure providers such as county councils can effectively influence the identification of Levy priorities.

Local planning authorities will develop an Infrastructure Delivery Strategy (IDS).

Chapter 4 of the technical consultation sets out the proposed content of the IDS. This includes a strategic spending plan setting out the local infrastructure priorities that will be funded by the Levy. The spending plan in the IDS will reflect the prioritisation choices of the local authority. This includes the proportion of the Levy that a local authority intends to secure on affordable housing through the ‘right to require’. The IDS will be subject to examination.

However, local authorities will also retain flexibility, and not be obliged to seek their full entitlement of on-site affordable housing, as set out under their ‘right to require’. This will enable them to redirect Levy resources towards other infrastructure priorities when necessary, balancing this appropriately with the affordable housing needs of their area.

Question 27 of the technical consultation seeks views on the content of the IDS spending plan.

Question 30 of the technical consultation seeks views on the right to require.

Chapter 3 of the technical consultation provides information about the proposed valuation process under the new Levy. The government envisions that in-kind contributions will be valued on a cost of construction basis. Further work will be undertaken with the Royal Institute of Chartered Surveyors to ensure that valuation is effective in the new system.

Chapter 1 of the technical consultation sets out the government’s proposals on how the ‘in kind’ routeway will operate. The government envisions that the value of any contributions towards infrastructure will have to equal or exceed the value of what otherwise would be secured through a calculation of the Infrastructure Levy. This means that the value of that agreement cannot, through the process of negotiation, go below a certain monetary value. This will be known as a ‘Levy backstop amount’. Our preferred approach is that any shortfall in the value of the infrastructure provided on site, or contributed to, will be made up through a cash payment to the local authority. This approach not only provides a baseline for negotiations but ensures fairness between the two routeways.

Chapter 6 of the technical consultation provides information about the neighbourhood share. It is envisaged that, under the new Levy, the value collected as Neighbourhood Share should not result in less value being allocated to neighbourhoods than in the existing system.

In a local authority charging the Infrastructure Levy, local authorities will set out the value of the neighbourhood share in their Infrastructure Delivery Strategy and how they determine and calculate this will be set out through regulations and guidance, reflecting any nationally set minimum proportion.

Question 34, 35 and 36 of the consultation seek views on the approach to the neighbourhood share.

Permitted development rights are a national grant of planning permission which allow certain building works and changes of use to be carried out without having to make a full planning application. We are interested in exploring the potential for certain types of such development to attract the Levy. Questions 9 and 10 of the technical consultation seek views on the approach to charging the Levy on schemes brought forward through permitted development.

The government recognises that valuations will be needed in some circumstances to determine liabilities, and that this creates potential areas of dispute and additional administration. The government intends for the ‘test and learn’ rollout to help manage and optimise this process.

The government will work with the Royal Institute of Chartered Surveyors to consider risks and ensure appropriate mitigations.

Question 20 seeks views on the proposed role for valuations of GDV.

Question 43 seeks views on enforcement.

New Section 204Z1 of the Levelling Up and Regeneration Bill sets out that regulations can provide for how s106 of the Town and Country Planning Act may or may not be used. This power enables s106 planning obligations to be crafted in the new system, to support how infrastructure will be delivered under the new Infrastructure Levy.

The majority of new development will be subject to the ‘core Levy routeway’. The government envisions the role for s106 agreements in this routeway as a new product – ‘delivery agreements’ – which will be used to secure integral infrastructure in circumstances where conditions cannot be used. In limited circumstances, delivery agreements could also be used to request additional money outside of Levy liabilities. This is set out in Chapter 1 of the technical consultation.

Any obligations contained in a delivery agreement will be subject to existing CIL Regulations (regulation 122) restrictions, and additional regulatory restrictions on use.

Question 8 of the technical consultation seeks views on the role of delivery agreements.

The government envisions that non-monetary contributions will be secured through delivery agreements.

Question 8 of the technical consultation seeks views on the role of delivery agreements.

Local planning authorities may also wish to direct an element of their levy funding towards non-infrastructure matters such as employment, training and skills provision.

Questions 4, 5 and 6 of the consultation seek views on allowing local planning authorities flexibility to spend Levy proceeds on non-infrastructure items.

The government is inviting local planning authorities to express interest in being included in the ‘test and learn’ process. Should local authority respondents be interested in becoming a ‘test and learn’ authority for the new Levy, they should contact officials at: [email protected]. Local planning authorities are not required to have a CIL charging schedule in order to express their interest.

Question 44 of the technical consultation seeks views on the proposed ‘test and learn’ approach.

The introduction of new Levy legislation will mean CIL charging schedules do not apply to new sites from the deadline date (although CIL will still be charged on existing development which was granted planning permission before the deadline date). We will provide for this via appropriate transitional provisions so that there is a seamless move into the new Levy system.

Chapter 7 of the technical consultation provides information about how the new Infrastructure Levy will be introduced.

Once the Levy is introduced nationally, we expect that the design of a charging schedule and plan-making will align. However, through the test and learn phase it may be the case that the development of new local plans and the introduction of the Infrastructure Levy are not fully aligned. Upon first introduction, an Infrastructure Levy charging schedule and Infrastructure Delivery Strategy will need to be introduced together – local authorities will not be required to undertake a Local Plan review for the Levy to be adopted.

The Bill provides a framework for the introduction of reforms to plan-making, but much of the detail will be dealt with through new regulations, a new NPPF focused on principles for plan-making and supporting guidance. DLUHC intends to consult on key principles for the new system of local plans later in 2023.